Reserve Bank of India flags rising stress in banking sector due to NPAs
There is no end of pain for the beleaguered public sector banks. In an assessment on Tuesday, the Reserve Bank of India said that operational risks, especially in state-owned banks is on the rise. And one of the solution to the problem is to provide good incentives to bank employees.
The Reserve Bank of India (RBI) flagged a rise in the stress caused by the gross non-performing advances (GNPA) ratio in the banking sector.
A non-performing asset, or advance, refers to a classification for loans where the borrowers have defaulted on payments for a period of more than three months.
GNPA ratio for scheduled commercial banks' (SCB) is expected to rise to 12.2% by March 2019, from 11.6% level seen in March 2018 , RBI said.
Senior officials of 11 public sector banks (PSBs) appeared on Tuesday before the Parliamentary Standing Committee on Finance, on the issue of the banks' massive non-performing assets (NPAs), or bad loans, and increasing number of fraud cases.
RBI said the 11 PSBs may experience a worsening of their GNPA ratio from 21.0% in March 2018 to 22.3%.
The 11 public sector banks, including IDBI Bank, Central Bank of India, Bank of India, Indian Overseas Bank, Dena Bank, Oriental Bank of Commerce, United Bank of India and Allahabad Bank, which appeared before the parliamentary standing committee of finance, are under prompt corrective action (PCA) framework and may experience a worsening of their GNPA ratio from 21% in March 2018 to 22.3% .
The banking sector is grappling with rising non-performing assets (NPAs), which touched Rs 8.99 lakh crore or 10.11% of total advances at December-end 2017.
Of the total gross NPAs, the public sector banks accounted for Rs 7.77 lakh crore.
World Economic Outlook: RBI remains positive
The central bank also said that the global growth outlook for 2018 remains positive despite some recent softness.
“Tightening of liquidity conditions in the developed markets alongside expansionary US fiscal policy and a strong US dollar have started to adversely impact emerging market currencies, bonds and capital flows. Firming commodity prices, evolving geopolitical developments and rising protectionist sentiments pose added risks," the apex bank said.
First Published: Jun 26, 2018 7:01 PM IST
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